News : Sanctions

In coverage of the International Oil, Gas, and Petrochemical fair in Tehran, the AFP reported on Friday that the influx of foreign economic interest in Iran may pose a threat to China’s economic and energy security. The AFP explains that some Chinese companies moved into Iran when Western sanctions made European and American companies much less willing to do business in the Iranian theocracy.

Now that those sanctions are being gradually lifted among nuclear negotiations and an unusually soft US position towards Iran, much of that business stands poised to flood back into the country, as evidenced by the estimated 600 foreign companies that were in Tehran for this week’s expo. Many of them offer a larger volume of capital or a better quality of products than their Chinese counterparts.

This potential threat to China’s economic relations with Iran may go a long way towards explaining the post-communist nation’s recent efforts to draw closer to Iran politically and militarily. On Monday, Chinese Defense Minister Chang Wanquan announced that his country was prepared to exchange military resources, personnel, and strategy with Iran in order to better safeguard “regional peace and stability.”

If China fears economic losses in Iran once more Western sanctions are removed, it is in China’s interest to either shore up its alliance with Iran in order to curry favor with the regime before that happens, or else try to stoke discord at the nuclear negotiations, to which it is a party.

The latter strategy may be difficult to apply in light of the fact that Iran itself has made its own defiant remarks towards the Western negotiating powers. On Wednesday, President Rouhani told a meeting of clerics and politicians that those nations were negotiating “because they do not have any other choice vis-à-vis the great and resistant nation of Iran.”

And on Thursday, Oil Minister Bijan Zanganeh explicitly rejected one of the terms of the interim agreement that Iran reached with the P5+1 negotiators in January. Zanganeh said that Iran would not accept any imposed limits on its oil exports, even in the short term, and that it would export the largest amount possible.

But Zanganeh’s defiance has not only been directed at the West. Last week he canceled a contract with China’s National Petroleum Corporation, claiming that the company had failed to fulfill some obligations under the deal. This demonstrates that as Iran’s economy continues to expand thanks to sanctions relief, the threat to China’s position in the country is not just hypothetical.

But Zanganeh’s gestures towards both East and West also suggest just how confident Iran is becoming in the strength of its position on the world stage. Amidst a soft American approach to diplomacy, Iran’s officials evidently feel secure playing both sides off against each other. Cancelation of the Chinese oil contract sends a signal to Western businesses that there is money to be made in Iran, but it also entices China to try to reclaim its previous position, even if it means committing a military force to the defense of its Eastern partner.

No doubt the Western nations and China both expect to gain from continued dealings with the de-sanctioned Iranian regime. But no matter which side wins in that competition, Iran is absolutely certain to benefit from an influx of capital and an even more emboldened position for its future dealings with nations across the globe.